E&O insurance for insurance agents is very important. It’s ironic that professionals in the protection industry might even consider going without cover themselves.
The insurance industry makes it easier for the people and organizations to operate as it provides a financial safety blanket that lessens the impact of unexpected events.
Since the service insurance agents provide is vital and they handle sensitive information, insurance agents should also protect themselves in case they mess up at work and get sued.
This is where errors and omissions (E&O) insurance for insurance agents come in.
What is the purpose of E&O insurance?
An E&O policy is also known as professional liability insurance that protects professionals from any actions that will hold them liable against claims of negligence or failure to perform their duties.
Basically, it is the insurance you need to protect your assets from lawsuits if you are accused of professional misconduct by your clients.
An insurance agent can be sued for a lot of things. If an error has been committed in the line of work, this could result in financial hardship on the part of your client and they can sue you for professional liability because you did not do your part correctly.
It could because you failed to renew their policy right away, you failed to recommend the appropriate coverage for their situation, or you failed to discuss the limits of their policy. You can even be sued even if you did not do anything wrong just because the client is irate and dissatisfied.
And even if the court grants the case in your favor, you still end up sending a lot of money defending yourself in court.
Even the best insurance agents in the field can find themselves in a lawsuit. This is why every insurance agent should carry E&O insurance for their own good.
Does errors and omissions insurance cover breach of contract?
Yes, your E&O may cover breach of contract. Aside from breach of contract, E&O insurance may also cover you for the following mistakes and oversights:
- Failure to bind or renew a policy on time
- Failure to recommend an adequate policy limit
- Failure to recommend the proper product
- Failure to inform the policyholder of changes in their policy
- Failure to disclose policy limits and exclusions
- Failure to disclose material and relevant information
Aside from these, an E&O policy may also cover copyright infringement, claims and damages, and the defense costs and other legal fees.
The professional liability coverage varies from one insurance provider to the next so it is important to get a quote from providers and compare them thoroughly.
Professional liability insurance is a claims-made policy which means you can only receive benefits if your policy is active both when the incident happened and when the claim was filed. Therefore you should not delay if you are selling policies as these won’t be covered by an E&O policy you buy after the sale.
What is not covered by an E&O policy
The following items may not be included in most E&O coverage:
- Property damage
- Customer identifiable information
- Patents or trade secrets
- False advertising
- Bodily injury
- Employment issues
If you want coverage for these areas, you can get them through other types of insurance policies or request them as an add-on coverage from your carrier for an additional price when you get a quote.
How much does E&O insurance cost for insurance agents?
Multiple factors determine how much error and omissions insurance for insurance agents will cost.
Aside from the type of policy and coverage you want, there are factors that the insurance services companies will look into that determines your premium:
Type of insurance you are handling
The insurance company will look at what type of insurance you are selling. P&C insurance agents in particular have a higher insurance premium.
New insurance agents have a higher premium than experienced agents because they have more tendencies to make mistakes.
The insurance company will have to look at your history and check if you have made prior mistakes as an insurance agent and how frequently you file for a claim.
Aside from getting E&O coverage, you should also be proactive in protecting yourself in case a dissatisfied client tries to recover their losses by suing you. Here are some tips on how to protect yourself:
Master your job
As an insurance agent, you should stay on top of your job. Be updated and stay focused. Master your portfolio – you should know every policy you handle inside and out. Be aware of contract limitations and exemptions and always inform your client about them.
When meeting a client, do a thorough discussion. Some would act like they are in a rush and just want things to get over it but your client must understand every single word in their policy. Discuss each section thoroughly and have them sign after each discussion as proof that you had this covered in your meeting.
Another way to protect yourself is to let policyholders sign waivers when they opt not to get the coverage that you recommended.
You should also have everything in a calendar so that you do not miss deadlines when it comes to processing applications, claims, and payments.
Update your clients
If there are updates or changes made on certain policies, have the initiative to contact your clients and inform them about it.
Don’t make promises
Refrain from making promises that you cannot keep to your clients just to seal the deal and have them get insurance coverage through you. This could come back at you later and your failure to deliver can result in a costly lawsuit.
Cheap e&o insurance for insurance agents
There’s nothing wrong with trying to cut costs by looking for cheap e&o insurance for insurance agents. But insurance is only effective if it actually provides a good level of cover.
Some cheap E&O policies may look good value, but come with exclusions that make it hard to claim or large deductibles to pay if you ever do claim.
In general the best way to get cheap e&o insurance for insurance agents is to shop around and get quotes from a variety of providers and make sure you read what is actually covered in each policy.
The career of an insurance agent involves a high level of risk. Aside from having to offer the right type of coverage and limits to a policyholder, they also have to process payments and paperwork correctly.
And the job is not just all about pleasing the policyholder. An insurance agent must also satisfy the requirements of the insurance carrier. Carriers expect all relevant facts about the policyholder disclosed on the application and they also expect to be paid on time.
Both policyholder and carrier can sue you for professional misconduct. Don’t wait for a close call or for a mistake to be made before you decide it is time to get coverage. You may win a legal battle but the costs will still be high.
As an insurance agent, you should take your own advice, and get protection. With such high risks, getting a good E&O insurance policy is a good move for your career.